US crude rail deliveries hit record high, still rising

Refiners increasingly depend on rail cars to bring in the oil being produced in increasing quantities throughout the US and Canada. Innovations in drilling techniques have allowed oil companies to cull oil from shale formations faster than pipeline companies can connect the wells to market.

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By BEN LEFEBVRE

The use of rail cars to transport crude oil in the US
reached a record in 2012 and continues to rise, the Association
of American Railroads said Thursday.

Refiners increasingly depend on rail cars to bring in the
oil being produced in increasing quantities throughout the US
and Canada. Innovations in drilling techniques have allowed oil
companies to cull oil from shale formations in South Texas,
North Dakota and elsewhere faster than pipeline companies have
been able to connect the wells to market.

A record 233,811 carloads of crude oil traversed the US in
2012, up from 65,751 carloads the year before, the association
said. In January, crude oil and fuel shipments via rail
averaged 13,043 carloads a week, up 54% from the 2012 weekly
average, the association added.

"There's never been a year when they've been 250% plus up,"
said Kevin Sterling, analyst at BB&T Capital Markets. "The
tank car manufacturers, they're building tank cars as fast as
the orders come in."

In Canada, rail shipments of crude oil and finished fuel
reached an average of 6,838 carloads in January, up 35% from
the 2012 average.

Rail shipments of oil will continue to rise as PBF Energy,
Phillips 66 and other refiners increase their demand for oil
from West Canada, Cushing, Okla., West Texas and the Bakken
shale formation in North Dakota, analysts have said.

Kinder Morgan Energy Partners said Thursday its
joint-venture project KW Express would build a
210,000 bpd crude-by-rail project on the Houston Ship Channel,
a major conduit for oil coming to the Houston refining belt.

The use of rail cars is also expanding further to the east
coast, where PBF runs two refineries that had been dependent on
more expensive imported oil.

"We're convinced this is a very, very long-term trend," PBF
chairman Tom O'Malley said of railcar-oil delivery during a
call with investors.

Dow Jones Newswires

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